College costs exceed $50,000 yearly at private schools and $22,000 at public ones. Section 529 plans let you save unlimited amounts tax-free and transfer unused funds to family members. Starting at community college, hunting scholarships, and planning early can cut the total burden.
A college education is a great way to prepare for the future, but it's also a big expense. With rising tuition costs and growing student loan debt, many families are concerned about how they'll pay for their children's higher education. That's where planning comes in. How much does college cost? The average price tag for the 2020-2021 school year was over $50,000 at private 4-year colleges and universities and over $22,000 for in-state students at public 4-year colleges and universities. Despite the high cost, higher education is an investment that could yield a big return: a lifetime of higher earnings. The good news is that there are a number of ways to help make a college education more affordable. For example, some students start at a community college and transfer to a 4-year school. And most students receive some type of financial aid in the form of grants, scholarships, or federal student loans. But to avoid having to rely too heavily on loans, it is wise to start planning and saving as early as possible. If you are looking for ways to put money aside for college, a Section 529 plan is an option to consider. You can contribute to a 529 plan regardless of your income, and lifetime contribution limits are generally quite high. A 529 college savings account owner retains full control of the account. A 529 plan offers tax advantages too. Your contributions and earnings grow tax-free. Tax-free growth can make a big difference over time. Once it's time to pay for college, you generally can withdraw money tax-free for qualified education expenses. If your child doesn't go to college or doesn't use all the money in the 529 plan, the unused assets can benefit another eligible family member without penalty when you name that family member the plan beneficiary. You don't need to save it all, but by starting to save early and looking into all the options available for paying for college, you can help make higher education more affordable for your family.
